December 20, 2008

In Shakespeare’s play “The Merchant of Venice,” Shylock, the usurious lender, attains the status of literature’s classic antisemitic stereotype, in part because of his relentless preying upon non-Jews.

But the victims devastated by Bernard Madoff, the investment guru charged with running an alleged Ponzi scheme that blew through $50 billion of other people’s money, were primarily his own.

In this, say observers looking at the case through a psychological lens, Madoff achieved a wholly different level of notoriety.

“Hitherto, all ethnic groups who ascended into a national class of benefactors made their wealth off other ethnic groups,” said Nelson W. Aldrich, author of the 1996 book “Old Money: The Mythology of Wealth in America.” “They soaked the Irish or sued the French Canadians. They wouldn’t dream of doing what Madoff did.”

This is not to say that Madoff excluded non-Jews from his ruinous scheme. Several large European banks and other non-Jewish institutions and individuals lost millions, even billions, through their investments with Madoff. But in interviews with the Forward, mental health experts agreed that from a psychological point of view, Madoff’s exploitation of his vast Jewish network of friends — many of them close — and acquaintances to bring investors into his alleged Ponzi scheme constituted a level of behavior verboten even as criminal actions go.

“He might have violated a primitive rule against hurting your own tribe,” said Ira Moses, director of Clinical Services at the William Alanson White Institute, a psychoanalytic training center. “He may have broken a taboo amongst criminals.” ...

The novelist Nathan Englander said that he generally has no patience for the idea that Jewish misdeeds will stoke antisemitism. But he said that the Madoff scandal — with its long lists of bilked Jewish charities and individuals covered in major newspapers — embarrassed even him.

“It really raises up for me this primal thing of, ‘This is the kind of thing that looks bad in a general Jewish way,’” Englander told the Forward. “It gave me that ‘circle the wagon’ mentality that I don’t have very often.”

Yet this kind of betrayal from inside a community is not unheard of — there is even a name for it: affinity fraud — but it is unusual.

How Madoff might have justified to himself his exploitation of his own community — in which he was not only a major philanthropist, but also actively engaged in an elite country club scene in Palm Beach, Fla., and New York — would depend on the extent to which he believed his own lies, psychologists said.

Had Madoff deluded himself into believing that his scheme could go on forever, he actually might have seen his victims as beneficiaries, psychoanalyst and Yale professor Dori Laub pointed out.

“It’s possible that what we’re dealing with is a man who’s essentially depressed and as a compensation begins to feel some omnipotence to fight the emptiness,” Laub said. “If you end up really being the messiah, you’ll be glorified.”

At the other end of the spectrum, some psychologists posited that unconscious hostility toward the Jewish community may have provoked him to choose his victims as he did. Noah Shaw, who has studied the psychology of money, said that he had worked with patients who generalized their hostile feelings toward their own family into antagonism directed at their ethnic community.

Stephen Rittenberg, a former director of treatment at the New York Psychoanalytic Institute who collaborated with Shaw on his research, had a similar assessment.

“If he were my patient I would try to address that aspect: Was there some kind of psychological hatred of his own family, his own community?” Rittenberg said.

But Shaw speculated as well that Madoff may have given his victims little thought at all and chose them simply because the Jewish community was the group most accessible to him.

“When people have feelings of inferiority or inadequacy, they need to beat the system, to outsmart the rules,” he said. “It works in an extremely temporary way. It’s the psychological mirror of a Ponzi scheme: If you don’t keep doing it, you collapse.”

Madoff’s motives are further obscured by the fact that there is something suicidal about the very structure of a Ponzi scheme, which has no way of working indefinitely.

“Maybe the ‘deal’ with Madoff is that on some deep level he’s not able to believe that the future exists,” said Rivka Galchen, author of this year’s novel “Atmospheric Disturbances” and a trained psychiatrist herself. “Otherwise he wouldn’t have been able to sleep at night for pretty much the majority of his professional life."

Or maybe, like Willie Sutton and banks, Madoff robbed Jews because that's where the money is.

In general, minority in-group morality as applied to business ethics rests on the assumption that most potential victims belong to the out-group. Gypsies, for example, tend to believe that driveway repair scams are morally okay because the great majority of the driveways in the world belong to non-Gypsies. But what if Gypsies got incredibly successful and ended up owning a sizable fraction of all the driveways in the world? Then they might wake up one morning to shocking headlines about how one Gypsy had scammed lots of other Gypsies out of billions.

Similarly, Bernie Madoff could set himself up as "the Jewish T-bill" (to quote the NY Times) with many of his customers trusting him with their money because they assumed he was delivering such stable returns by cheating (through front-running) the out-group of NASDAQ traders, not cheating (through a Ponzi scheme) the in-group of investors. After all, why would anybody try to cheat Jews, who, as we all know, are a tiny, beleaguered, discriminated-against minority ... Except that they now own a remarkable fraction of the world's financial assets, making them a prime target for scam artists.

“We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” — President Bush, Oct. 15, 2002

That, of course, as my readers (but practically nobody else's) know, was at the White House Conference on Minority Homeownership

... “How,” [Bush] wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Mr. Bush chose to oversee them — an old prep school buddy — pronounced the companies sound even as they headed toward insolvency.

... “The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

For much of the Bush presidency, the White House was preoccupied by terrorism and war; on the economic front, its pressing concerns were cutting taxes and privatizing Social Security. The housing market was a bright spot: ever-rising home values kept the economy humming, as owners drew down on their equity to buy consumer goods and pack their children off to college.

Lawrence B. Lindsay, Mr. Bush’s first chief economics adviser, said there was little impetus to raise alarms about the proliferation of easy credit that was helping Mr. Bush meet housing goals.

“No one wanted to stop that bubble,” Mr. Lindsay said. “It would have conflicted with the president’s own policies.”

Today, millions of Americans are facing foreclosure, homeownership rates are virtually no higher than when Mr. Bush took office, Fannie and Freddie are in a government conservatorship, and the bailout cost to taxpayers could run in the trillions. ...

But in private moments, aides say, the president is looking inward. During a recent ride aboard Marine One, the presidential helicopter, Mr. Bush sounded a reflective note.

Darrin West could not believe it. The president of the United States was standing in his living room.

It was June 17, 2002, a day Mr. West recalls as “the highlight of my life.” Mr. Bush, in Atlanta to unveil a plan to increase the number of minority homeowners by 5.5 million, was touring Park Place South, a development of starter homes in a neighborhood once marked by blight and crime.

Mr. West had patrolled there as a police officer, and now he was the proud owner of a $130,000 town house, bought with an adjustable-rate mortgage and a $20,000 government loan as his down payment — just the sort of creative public-private financing Mr. Bush was promoting.

A lot has changed since then. Mr. West, beset by personal problems, left Atlanta. Unable to sell his home for what he owed, he said, he gave it back to the bank last year. Like other communities across America, Park Place South has been hit with a foreclosure crisis affecting at least 10 percent of its 232 homes, according to Masharn Wilson, a developer who led Mr. Bush’s tour.

“I just don’t think what he envisioned was actually carried out,” she said.

Park Place South is, in microcosm, the story of a well-intentioned policy gone awry. Advocating homeownership is hardly novel; the Clinton administration did it, too. For Mr. Bush, it was part of his vision of an “ownership society,” in which Americans would rely less on the government for health care, retirement and shelter. It was also good politics, a way to court black and Hispanic voters.

But for much of Mr. Bush’s tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like Mr. West.

So Mr. Bush had to, in his words, “use the mighty muscle of the federal government” to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

Concerned that down payments were a barrier, Mr. Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.

And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican Congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away, as Mr. West did. Many economic experts, including some in the White House, now share that view.

The president also leaned on mortgage brokers and lenders to devise their own innovations. “Corporate America,” he said, “has a responsibility to work to make America a compassionate place.”

And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.

“This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”

There's lots more, much of it making Bailout Czar Henry Paulson look like a prime fool.

Anyway, I want to say that the New York Times is welcome to my research. Perhaps one of these days, they'll run a story pointing out that George W. Bush's Transportation Department was fighting discrimination against Arabs by airport security on September 11, 2001 because Bush had promised to outlaw profiling of Arab air travelers in his second Presidential Debate with Al Gore on October 11, 2000.

December 19, 2008

I have never been so upset by a poll in my life. Only 22% of Americans now believe "the movie and television industries are pretty much run by Jews," down from nearly 50% in 1964. The Anti-Defamation League, which released the poll results last month, sees in these numbers a victory against stereotyping. Actually, it just shows how dumb America has gotten. Jews totally run Hollywood.

The person they were yelling at in that ad was SAG President Alan Rosenberg (take a guess). The scathing rebuttal to the ad was written by entertainment super-agent Ari Emanuel (Jew with Israeli parents) ...

Ari Emanuel, who is the original for Jeremy Piven's "Ari Gold" character on HBO's Entourage, is the brother of Obama chief-of-staff Rahm Emanuel.

Whatever happened to Armenian moguls? It seemed like in the past there was often one studio boss who'd be Armenian.

In general, isn't it weird how it has become fashionable to be naive and less worldly, as evidenced by the drop in percentage of Americans who agreed with the factual statement "the movie and television industries are pretty much run by Jews"? It used to be that people felt proud of knowing the score, of understanding the way of the world, of being clued in to how things work.

Today, though, it's cool to be ignorant. I don't think it's just people who actually know the facts about Hollywood and lied to the ADL to be safe. Judging from comments by countless anonymous people on the Internet, a lot of people are proud of being out of touch with what's happening. They want you to be aware that they've cultivated their cluelessness. It's really very strange for somebody like me who can remember back to the late 1960s. That era had its flaws, to be sure, but willful ignorance was not one of them.

The Jews are so dominant, I had to scour the trades to come up with six Gentiles in high positions at entertainment companies. When I called them to talk about their incredible advancement, five of them refused to talk to me, apparently out of fear of insulting Jews. The sixth, AMC President Charlie Collier, turned out to be Jewish.

As a proud Jew, I want America to know about our accomplishment. Yes, we control Hollywood. Without us, you'd be flipping between "The 700 Club" and "Davey and Goliath" on TV all day.

So I've taken it upon myself to re-convince America that Jews run Hollywood by launching a public relations campaign, because that's what we do best. I'm weighing several slogans, including: "Hollywood: More Jewish than ever!"; "Hollywood: From the people who brought you the Bible"; and "Hollywood: If you enjoy TV and movies, then you probably like Jews after all."

I called ADL Chairman Abe Foxman, who was in Santiago, Chile, where, he told me to my dismay, he was not hunting Nazis. He dismissed my whole proposition, saying that the number of people who think Jews run Hollywood is still too high. The ADL poll, he pointed out, showed that 59% of Americans think Hollywood execs "do not share the religious and moral values of most Americans," and 43% think the entertainment industry is waging an organized campaign to "weaken the influence of religious values in this country."

That's a sinister canard, Foxman said. "It means they think Jews meet at Canter's Deli on Friday mornings to decide what's best for the Jews." Foxman's argument made me rethink: I have to eat at Canter's more often.

"That's a very dangerous phrase, 'Jews control Hollywood.' What is true is that there are a lot of Jews in Hollywood," he said. Instead of "control," Foxman would prefer people say that many executives in the industry "happen to be Jewish," as in "all eight major film studios are run by men who happen to be Jewish."

But Foxman said he is proud of the accomplishments of American Jews. "I think Jews are disproportionately represented in the creative industry. They're disproportionate as lawyers and probably medicine here as well," he said. He argues that this does not mean that Jews make pro-Jewish movies any more than they do pro-Jewish surgery. Though other countries, I've noticed, aren't so big on circumcision.

I appreciate Foxman's concerns. And maybe my life spent in a New Jersey-New York/Bay Area-L.A. pro-Semitic cocoon has left me naive. But I don't care if Americans think we're running the news media, Hollywood, Wall Street or the government. I just care that we get to keep running them.

I always thought The Larry Sanders Show had the most interesting take on this perpetual question. From an earlier article in the Los Angeles Times:

[Producer] Artie chews out [writer] Phil after his repeated homophobic jokes prompt a gay assistant (Scott Thompson) to hit the show with a sexual harassment lawsuit. “You know who runs this town?” Artie growls at Phil.

“The Jews?” Phil says.

“No,” Artie retorts. “The gay Jews.”

Interestingly, sometimes people go in the opposite direction and make inside jokes by portraying moguls as non-Jewishly as possible. In Evelyn Waugh's 1948 Hollywood novel The Loved One, the highest ranking figure in the studio is named Erikson, who speaks in "blunt Nordic terms." Similarly, in "Singing in the Rain," the upstanding but clueless 1920s movie studio mogul is named "R.F. Simpson" and is played by 6'-2" cowboy actor Millard Mitchell.

It's funny how history gets written. Back in Golden Age Hollywood, eight major studios were nepotistically run by Jewish moguls who hired their relatives and in-laws as executives, and the other studio was owned by Walt Disney, who nepotistically hired his relatives as executives. For decades now, a controversy has raged over whether Walt Disney was anti-Semitic. No comparable controversy exists over whether the other eight studios were anti-Gentilic. In fact, the term "anti-Gentilic" doesn't even exist. (As I recall, George Orwell had some insights into the political usefulness of the nonexistence of words.)

A reader suggests Bernie Madoff must have been running two scams, on and off: the famous Ponzi pyramid scheme, but also abusing his position as a "market-maker" to front-run (i.e., insert his buy and sell orders just in front of his customers' orders in the direction that they are running.)

The idea that Madoff was flexibly switching back and forth among his scams makes a lot of sense. It's hard to keep a Ponzi scheme going for years, and it's hard to avoid being caught front-running because it's such an obvious gag. So, you do a little front-running to get the Ponzi scheme going, turn it off before the SEC gets around to checking, turn it back on when you need to get through a tough stretch with your Ponzi scheme, etc. Further, having a well-known opportunity to front-run as a market maker serves as great advertising among your sophisticated investors who assume your too-good-to-be true returns coming from cheating outsiders, not from cheating the insiders.

Why confess only to the Ponzi scheme? Well, that probably helps limit the number of family members who go to prison.

Those tags stick to Lin wherever he goes, even as the starting point guard for Harvard's basketball team.

"It's a sport for white and black people," Lin said. "You don't get respect for being an Asian American basketball player in the U.S."

Although the game is brimming in popularity among Asian American youth - there are Asian leagues, club teams like the San Jose Ninjas and San Jose Zebras, and packed courts outside schools, churches and temples - Lin practically is alone.

Of 4,814 Division I men's basketball players in 2006-07, there were 19 Asian Americans (including Pacific Islanders and ethnically mixed), according to the most recent NCAA Student-Athlete Race and Ethnicity Report. That's 0.4 percent.

Players, coaches and sociologists cite stereotypes and cultural factors as reasons that percentage might not rise very much in the foreseeable future. At the same time, there are players and coaches making inroads to mainstream, high-profile basketball, and there's a feeling of pioneer spirit among them.

"Especially now that there are lots of Asian Americans growing up and playing, I have to try to hold my own in college," Lin said. "It's definitely motivational and it gives me a chip on my shoulder."

Here's a Washington Post story that's relevant to the mortgage meltdown. As you know, Wall Street poured hundreds of billions of dollars into ludicrously inflated and implausible mortgages in the four "sand states" of California, Arizona, Nevada, and Florida. In essence, this was a bet that Hispanicization and high home values are compatible. We now know the answer.

But ... was the question even asked? Did anybody at a financial firm send around an email to fellow executives asking, "Isn't California full of Latinos? Can Latinos really pay back these giant mortgages were handing them? If Latinos can't, then who is going to pay even more to move to a neighborhood that we just helped tip Latino? What exactly are we doing in California?"

Of course not. Such an email would come up in "discovery" of an anti-discrimination case, as the federal government itself is finding out:

A federal magistrate judge has ruled that the U.S. Secret Service "made a mockery" of long-standing rules by failing to preserve, concealing and even destroying evidence sought by 10 African American current and former employees in a racial discrimination case.

In an opinion filed late Wednesday in U.S. District Court in Washington, Judge Deborah A. Robinson effectively barred the agency from presenting a defense in the class-action lawsuit filed in 2000.

Robinson called the penalty an appropriate sanction for years of delay because the Secret Service's conduct "prejudiced Plaintiffs' ability to conduct meaningful discovery and prepare to address the merits of their claims."

The judge's ruling effectively lowers the burden of proof for plaintiffs and limits the amount of evidence government lawyers can use to defend the agency against allegations that supervisors routinely harassed black agents and refused to promote them to management positions.

Robinson earlier sanctioned the agency three times for being slow to search for documents as directed by the court and to turn over racially charged e-mails shared by white Secret Service supervisors. Jennifer I. Klar, a lawyer with Relman & Dane, which is representing the plaintiffs pro bono, said the ruling "sends the clear message that no entity, not even the United States government or the elite Secret Service, is above the law."

A spokesman for the Secret Service called the decision "expected" given Robinson's prior rulings. But he said the agency "wholly disagrees" with Robinson's findings and would appeal.

Secret Service spokesman Edwin M. Donovan said the agency has "made every attempt to respond fully and completely to all discovery requests," turning over 22 million documents, asking nearly 300 former employees if they kept relevant records and paying a contractor $2 million to search 350 employee computers and the agency server.

And what's been found in these emails? Such incriminating speech as this example highlighted by ABC News as part of a major story on discrimination in the Secret Service:

Another white senior supervisor, apparently bitter towards the Rev. Al Sharpton and angry at Ruben Studdard for winning "American Idol" in 2003 over Clay Aiken, allegedly wrote, "Reverse discrimination and political correctness are destroying virtually every aspect of American life."

I'm glad ABC put "allegedly" in that sentence, since obviously if he did actually say, "Reverse discrimination and political correctness are destroying virtually every aspect of American life," he should be taken out back and shot immediately. (You didn't know that? You should. It's in the Constitution -- the Zeroth Amendment.) So, we wouldn't want to be hasty in determining whether or not somebody said that.

But the black agent who is the lead plaintiff was discovered to have personally forwarded:

Messages sent from his Secret Service e-mail account include a comparison of black, white and Hispanic wives and how they handle household chores, parenting differences between black and white mothers and a list entitled "No U D'ient," emulating vernacular sometimes associated with low-income African-Americans and including lines that mock those who live in government housing and use food stamps.

December 18, 2008

The ABC7 I-Team has learned that an attorney who went undercover for the FBI in the late 1980's says he told federal authorities years ago about wrongdoing by Blagojevich.

His name is Robert Cooley.

Cooley was a criminal defense lawyer in Chicago in the late 1980's who became one of the most potent witnesses against Chicago corruption, testifying for federal prosecutors in cases that resulted in dozens of convictions.

Cooley says that before Rod Blagojevich got into politics he was a bookmaker on the North Side who regularly paid the Chicago mob to operate.

"When I was working with government wearing wire, I reported, I observed Rod, the present governor, who was running a gambling operation out in the western suburbs. He was paying street tax to the mob out there," said Robert Cooley, federal informant.

On a web-based interview show last week, Cooley said he reported to federal authorities nearly two decades ago that Rod Blagojevich had been operating an illegal sports gambling business.

During Operation Gambat in the late 1980's and early 1990's, Cooley's undercover work and testimony put away 24 crooked politicians, judges, lawyers and cops.

Several years ago, when Mr. Blagojevich was running for re-election, Cooley provided the same information to the ABC7 I-Team. Because Cooley did not want to be identified at the time and the governor denied it, ABC7 did not report the story.

On Tuesday, Cooley spoke on the record.

He told ABC7 that Mr. Blagojevich regularly paid a so-called street tax to Robert "Bobby the Boxer" Abbinanti, a convicted outfit gambling collector. In the early 1980's, Abbinanti was working for convicted West Side mob boss Marco D'amico. Bookies pay street taxes to the crime syndicate in exchange for being allowed to operate such a racket.

"I predicted five years ago when he ran the first time that he was a hands on person who would be selling every position in the state of Illinois and that it exactly what happened," said Cooley.

This is the caliber of human being who becomes a successful Illinois politician. And, therefore, this is the type of man that Barack Obama, with every option in the world open to him, chose to spend his days in alliance with, so burning was Obama's hunger for power.

I moved to Chicago three years before Obama and had a lovely time there. But never once did I ever consider becoming a Chicago politician. I can't recall ever meeting anybody in Chicago who grew up elsewhere who said they had ever thought of becoming a Chicago politician. It no more occurred to us than to apply for membership in the Chicago Outfit. But Obama spent three years at Harvard Law School telling everybody that he was going back to Chicago to become mayor.

It's not as if Obama wanted to be a reformer, like his predecessor in the U.S. Senate, Peter Fitzgerald, who brought Patrick Fitzgerald to town to be Eliot Ness. Obama didn't want to change the rules of Illinois politics; he wanted to win at Illinois politics.

The potential for massive new spending has touched off a frenzy among interest groups eager to claim their share of the expanding stimulus pie. The profusion of requests from governors, transportation groups, environmental activists and business organizations is spawning fears that the package could be loaded with provisions that satisfy important Democratic constituencies but fail to provide the jolt needed to pull the nation out of a deepening recession.

"It's everybody's wish list, everybody's favorite program. And I think that's a big mistake," said Alice Rivlin, a Brookings Institute economist and former budget director for President Bill Clinton who has been advising Democrats. "I agree with the Obama team that we need a big increase in public investment, but it should be done very, very wisely," rather than through a rushed process that risks being "seen as scattering money to the wind.

An Obama adviser involved in crafting the stimulus package said the transition team was keenly aware of the potential pitfalls and was focused on funding ideas that would quickly pump money into the sagging economy, fulfilling Obama's promise to create or preserve 2.5 million jobs by 2011. Because many ideas probably won't meet that standard, the adviser said, the team is developing a screen to keep them out.

So, let me see if I have this straight ... Experienced Democratic expert Alice Rivlin is worried that the Obama Administration will spend the money too fast and the Obama adviser responds that they are devising a system to make sure they don't spend the money too slow.

Maybe I'm just not showing a positive mental attitude, but this does seem like a fundamental conundrum -- you have to spend it fast to make it a stimulus, but then you are probably just going to waste it -- that somebody ought to ask Obama about before Congress hands him $850 billion.

And why all the huffing and puffing over "infrastructure," which obviously takes more time to get going than just hiring, say, some social workers. Is it because "infrastructure" sounds manly and complex? Is it because the unions have been demanding more spending on infrastructure since 1982? (I recall identical authoritative sounding predictions during the 1981-82 recession from the AFL-CIO that America was about to collapse in a heap unless Congress voted a giant increase in infrastructure spending.) Is it to keep illegal immigrant construction workers from going home to Mexico before they can be "put on the path to citizenship" (and voting Democratic)? Is it because that's what they do in Chicago and Obama mostly knows the Chicago Way?

And shouldn't we start thinking about how to export more? The most obvious government policy to cut the trade deficit by selling more abroad is the for the government to cut back on environmental restrictions on mining.

Four days before the Bernie Madoff bust, I found myself, through circumstances too complicated to explain, in a Bukharan Kosher restaurant in Queens, eating skewers of lamb, beef, liver, and sweetbreads with a wildly mixed group of guys that included a retired Jewish gangster I'll call Lucky, since most of his rackets involved gambling of some type. Lucky had great stories to tell. He saw himself as the last of a dying breed—"I'm the caboose," he kept saying—a breed that spawned legends like Meyer Lansky, Mickey Cohen, Bugsy Siegel, and Longy Zwillman. He was never a boss, more of an independent operator who specialized in running gambling rackets in South America, street lotteries in Africa, you name it. But it seemed he'd been on speaking terms with—and had stories to tell about—all the icons of the Jewish mafia. He was over 70 but looked like a tough 50 and wore a baseball cap advertising some fighter he was backing, and he fought like a wildman to pick up the tab for the table of eight from a thick roll of big-number bills.

Anyway, the more I read about Bernie Madoff, the more disgusted I am, not just with him but with the whole crowd of country-club suckers he allegedly conned, the phony "gentility" (in every respect) they represent.

It began to seem to me that the whole Bernie Madoff scandal was not about Jews and money but Jews and respectability. (And, by the way, let's cut the crap about Jews and money in the first place. If you look at the history of America, the big money has always been made by criminals of non-Jewish persuasions. The non-Jews who committed genocide to steal the land in the first place. The non-Jews who built up big fortunes through the disgusting and murderous crime of slavery. The non-Jews who built "respectable" old-money fortunes on the broken backs of the wage slaves they exploited. As Balzac famously said, behind every great fortune is a great crime. Old money in America is for the most part just old crime well-varnished by time.)

Still, as I found myself more and more disgusted by the (alleged) crimes of Bernie Madoff, I kept thinking—in light of my encounter with Lucky—"Where are the Jewish gangsters of yesteryear?" These were people an ethnic group could be, well, if not exactly proud of, then certainly not entirely ashamed of. At least Meyer Lansky—or "Hyman Roth," as they called him in the subtly anti-Semitic Godfather II—"always made money for his partners." Bernie Madoff, if the charges are to be believed, always stole money from his partners. (It should be remembered that while the perp was a Jew, oh so many of his victims were, too.)

A great civilization, a great people, is always known by the most brilliant, talented, and learned among them: Einstein, Isaac Bashevis Singer, Leonard Bernstein. But it's also known by the quality of its crooks. (Singer knew that.) And as Jewish crooks go, Bernie Madoff would be a sad step down.

What went wrong? If you ask me, the Bernie Madoff scandal was a tragedy of misguided upward mobility—not about Jews and money but about Jews and a sadly imitative notion of status.

Here's the New York Post on Bernie and his alleged victims:

Working the so-called "Jewish circuit" of well-heeled Jews he met at country clubs on Long Island and in Palm Beach, and through his position on the boards of directors of several prominent Jewish institutions, he was entrusted with entire family fortunes.

"The guy was totally respected. ..."

The key words here are country club and respected. This is a scandal that hinges on a false connection between country-club membership and "respectability." Bernie seems to have preyed on those Jews who worship the false idol of WASP respectability. The sham gentility of country-club life.

Give me a break. Give me a gangster over a golfer any day.

A couple of caveats and a personal confession. First, I don't want to over-romanticize—as some do—Jewish gangsters or gangsters in general. The incomparable Murray Kempton, the greatest writer to grace the pages of newspapers in the past century, had a line about this. Talking to be about the gangsters he knew—and he knew a lot of them (he was pen pals with Carmine "the Snake" Persico when the Snake was in the clink)—he noted that not all of them deserve the raffish, Guys and Dolls dignity they are so often endowed with. Here's what Murray said:

People are very romantic about these guys, but the only thing I've ever learned is that if you talk to gangsters long enough you'll find out they're just as bad as respectable people.

Bada bing! Murray always found the site of contestation, the node of friction, in the way we construe our idols. I loved that inversion of our conventional definition of "respectability."

On the other hand—second caveat—I don't want to hear people, Jews or non-Jews, worrying that we can't talk about Jewish financial crime without arousing cretinous anti-Semites. I think my credentials on this point have been established well enough by the 600-page book I edited on anti-Semitism, Those Who Forget the Past. Yes, Bernie's a Jew, and he seems to have stolen a lot of money, but, as I've noted, stealing is not a genetically Jewish crime that Jews should be afraid to talk about. What's worth talking about is how he got away with it. Which is where the fetish of "respectability" comes in.

Here, I'll admit that one reason I want to talk about Jews and respectability is, in part, personal, familial. There were two sides to the family I grew up in. One, my mother's side, the country-club side (some of them, anyway) made clear—in ways subtle and overt—that they looked down on my father, because he couldn't afford—actually, better—wasn't interested in joining country clubs, much less seeing them as symbols of status and—yes—respectability.

Now, I don't think there's anything wrong per se in Jews wanting to belong to country clubs. They deserve a nice place to feel like they belong and get their children tennis lessons. Sure, some Jewish country clubbers turn themselves into pathetic Ralph Lauren manqués. (Manqué manqués?) And it's true the Jewish interest in country clubs probably derives from the "gentleman's agreement" anti-Semitism that excluded Jews from WASP clubs, driving some of the more status-anxious to build bigger and better ones—when they weren't lobbying shamelessly for admission to the very clubs that excluded most of their co-religionists. Nothing wrong with it, human nature across all ethnic groups, I suppose. Yet nothing to brag about either, in its philistinism.

And Bernie Madoff's M.O., Bernie's milieu, Bernie's happy hunting ground was the country club. Bernie was the King of Clubs. If you read the reports in the Times and the WSJ, people paid hundreds of thousands of dollars just to join country clubs that would allow them to hobnob with Bernie and the friends of Bernie, sucking up to the second-raters who sit on country-club admissions boards just so they could spend a weekend with Bernie, in the hope he'd let them into his exclusive money club, his ultrarespectable club of clubs: Club Ponzi.

What an inversion, a perversion of true Jewish respectability to imitate the most dull-witted of their WASP brethren. I thought Jews were supposed to respect brains, not golf bags. Shows you how wrong stereotypes can be. Or maybe the wisdom of Abbie Hoffman's aphorism: that Jews have to decide "whether to go for the money or to go for broke."

Give me a Jewish gangster any day. They go for both.

Take Meyer Lansky, or rather "Hyman Roth," Lee Strasberg's version of Lansky in The Godfather 2. What is it we like about him? The TV dinner tray! He runs the world's underground financial system, an illicit stock exchange and banking system combined, but what he likes most is the simple life at home in front of the tube with his wife. Sure, he'll enjoy an evening from time to time at one of his luxe Cuban casinos, but country clubs? Please. You knew Meyer Lansky wouldn't care whether he got into this or that Palm Beach Country Club, wouldn't care about hobnobbing with the respectable—i.e., Wall Street-approved—gangsters.

For me, the big question about Bernie, if he's guilty of all he's been accused of, is whether he secretly despised the suckers who fell so easily for his "respectable" scams. Secretly enjoyed creating sham castles in the air for rich losers, thereby exposing their stupidity and the emptiness of their idea of respectability.

Could Bernie have seen though it all, been a kind of Buddha of bogusness, teaching the lame-os a lesson about how worthless their sham respectability was? Or did he buy into it himself? I'd like to believe the former, but I think it's probably the latter.

It made me think of something Lucky mentioned in one of his stories about the old days: the controversy among the Jewish gangster alte kockers (old guys) about Mickey Cohen and the Irgun ship.

It seems Mickey Cohen (you know, the L.A. crime boss from the '40s and '50s; he appears in some James Ellroy novels) went around leaning on a lot of respectable and nonrespectable types for money for the Irgun, the Jewish-gangster-favored faction of Zionists in the perilous period of the founding of the state of Israel. It seems Mickey Cohen claimed he'd used the money to buy a ship and fill it full of guns and ammo for the Irgun to fight for survival of the embattled state, but alas—Mickey said—the ship had sunk on its way to Haifa or something.

There were always rumors, according to Lucky, that there never was a ship, that Mickey Cohen kept the money for himself—pulled a Bernie. Lucky didn't believe it. Honor among thieves. There was a ship. He was sure.

I hope it's true. I really think there is a difference between the disreputable but colorful and—in their own way—honorable Jewish gangsters and someone like Bernie. As that Jewish folksinger Zimmerman wrote, "When you live outside the law you must be honest." A lesson about true respectability that Bernie seems never to have learned. A lesson the old time Jewish gangsters could teach us.

Ron Rosenbaum is the author of The Shakespeare Wars and Explaining Hitler.

Various laws attempt to protect and reward insider whistleblowers who call to public attention wrongdoing by the institutions that employ them. But little incentive exists for outsiders to point out big shots' fraud and misinformation, other than public approbation. So, let's take a moment to salute Harry Markopolous, who first brought Bernie Madoff's Ponzi scheme to the Securities and Exchange Commission's awareness in 2000 and then wrote them a 19 page letter in 2005 listing 29 Red Flags (you can read it here; thanks to Clusterstock).

Of course, the SEC didn't do anything substantitive about it (other than one SEC official marrying into the Madoff family). Markopolous tried to talk the SEC into taking action by warning them that if they didn't move fast, Elliot Spitzer would beat them to it. (But now we know that the Spitzer family real estate firm, like so many New York real estate businesses, had money with Madoff.)

One thing that stands out is that Markopolous wasn't alone. He was just the guy who kept complaining about it. Markopolous's 2005 letter cites numerous experts, either by name or by position, who figured out this was a fraud. But Markopolous was one of the few to do anything about it.

Also, at least two journalists, one for Barrons and one for a trade paper, exposed this scam early in this decade, but nobody cared.

There's just not much of a market for debunking. People want to believe in geniuses. Look how many people believe Malcolm Gladwell is a genius. If he isn't a genius, everybody asks, how come he's so rich? Hunnh? Hunnh?

Malcolm, himself, is dimly aware that he's kind of an idiot, but he believes that the true geniuses are the people he profiles so credulously. In turn, the folks Malcolm writes up probably had doubts about their own brilliance, too, at least until they saw themselves acclaimed in The New Yorker. After all, you can't put anything over on The New Yorker -- they've got a hung-over Jay McInerney checking the facts! So, they must be legit.

December 17, 2008

Do you ever get the sinking feeling that the biggest difference between Bernie Madoff and most of the public figures our age is that he admitted he was running "a giant Ponzi scheme?"

Madoffnomics consisted of making conspicuous donations to worthy ethnic causes in order to build a benevolent reputation in order to get an ever increasing amount of money flowing in to pay off those who had gotten on board early, but with no chance of later investors coming out ahead. How different is that from the Bush-Rove program of "compassionate conservativism," as embodied in Bush's jihad against down payments on home mortgages as denying minorities the American Dream?

December 16, 2008

Barack Obama has launched the era of the political economy [well, I think George W. Bush and his minions gave it a good push in that direction], where, to an unprecedented degree, the White House will determine the course, structure and function of the American economy; where, if reports of $2 trillion worth of stimuli are to be believed, the size and scope of the federal government has the potential to nearly double over the course of eight years. He's already shifted the paradigm's default from private enterprise to public action. To the extent that your program or pet cause gets to share in the spoils, it must justify itself to the Obama administration.

Everyone who wants anything from the federal government has to interface with the now conjoined office of intergovernmental affairs and public liaison in the Obama White House. To head this office, Obama has appointed his best friend and most trusted counselor, Valerie Jarrett. Jarrett has appointed as her chief of staff Michael Strautmanis, one of the Obama family's best friends and another trusted confidant. Traditionally, the intergovernmental affairs portfolio and the OPL portfolio have been kept separate, although Karl Rove unified them in the Bush White House.

Cecilia Munoz, a senior vice president at the National Council for La Raza, is a powerhouse who knows everyone in Washington. She's going to be the formal director of intergovernmental affairs. Tina Tchen, another long-time Obama friend, will be the head of the office of public liaison. Additional staff appointments will follow; usually, the deputies in these offices aren't big names; the names being considered for the sub-department portfolios in the Obama administration would have been credible candidates for the top jobs themselves.

The bigger the federal government gets, the more important these offices become. They'll probably be THE powerhouse in the Obama White House from the perspective of politics, constituency relations, interest and client groups, the Washington community, state, local and tribal governments. Jarrett won't just pass messages between the outside world and the president. Her job will be manage the relationship between the outside world and the president, and, vitally, she and her staff will have the juice to make decisions about how the Obama administration relates to just about every external constituency.

No wonder Valerie Jarrett dropped out of the bidding for Blago's blessing. Who wants to be crummy U.S. Senator when you get to be fixer-in-chief for the new quasi-nationalized economy?

And how about having a Senior VP of La Raza stationed right at the chokehold?

The interesting questions at this point are whether the Madoff case represents merely a conventional affinity scam, exceptional only in being carried out among the richest and most influential affinity group in the country, or whether it's representative of a general trend where the more ethnocentric Jews are being hit particularly hard by the general financial collapse (not just Madoff), perhaps due to being more aggressive risk-takers. If so, that could have sizable political and cultural ramifications.

For example, consider the high regard with which the opinions of the Southern Poverty Law Center are treated. It basically comes down to the assumption: if they are rich, if they can afford to trumpet their assertions widely, then must be legit, right? (In truth, the vast wealth this so-called charity has piled up is more a sign of their moral corruption, but human beings respect riches.) What happens, though, if the SPLC, which gets much of its money from the kind of people who invest with the Bernie Madoffs of the world, isn't quite so rich in the future?

The other question is: Exactly what is so unique about what Bernie Madoff did, other than to admit his business was a "giant Ponzi scheme"?

December 15, 2008

Because it's so much work to be a Mormon in good standing, Mormons tend to trust other Mormons, making them famously vulnerable to large scams operated by the small number of conmen self-disciplined enough to have spent years piling up credentials as good Mormons.

Bernie Madoff's $50 billion Ponzi scheme was rather like the kind of "affinity scams" that have plagued Mormons. Madoff joined all the right Jewish country clubs and gave to all the right Jewish charities, allowing him to fleece some very deep Jewish pockets.

But the sophistication level of the victims is rather different. While there are rich Mormons, overall Mormons are pretty middling in wealth (depending on whether you measure per capita or per family), while Madoff's victims weren't middling.

Why did members of the Palm Beach Country Club, various hedge fund managers, and major league sports franchise owners fall for what appears to have been a simple, old-fashioned scam in which implausible returns are seemingly delivered, but only by using new investors' cash to pay off old investors? (By the way, the golf scores Bernie reported to the USGA for handicapping were all in the eighties, as remarkably consistent as his reported return on investment.)

One theory (and it's only a theory) is that more than a few of these sophisticated clients assumed Bernie was cheating -- either through insider trading or "front-running" -- and they wanted in on his illicit profits.

They just never dreamed Bernie was cheating them.

And why did Bernie cheat them in particular? Because, these days, as bankrobber Willie Sutton replied when asked why he robbed banks, "That's where the money is."

Another of Blagojevich’s Senator schemes has proven embarrassing to one of the strongest supporters of illegal immigration: the huge Service Employees International Union, which claims to represent unskilled workers, often illegal aliens. The SEIU is potent political force on the far left, but it curiously less potent at getting higher pay for its teeming members.

"ROD BLAGOJEVICH stated, 'I want to make money.' During the call, ROD BLAGOJEVICH, HARRIS, and Advisor B discussed the prospect of working a three-way deal for the open Senate seat. HARRIS noted that ROD BLAGOJEVICH is interested in taking a high-paying position with an organization called 'Change to Win,' which is connected to Service Employees International Union ('SEIU'). HARRIS suggested that SEIU Official make ROD BLAGOJEVICH the head of Change to Win and, in exchange, the President-elect could help Change to Win with its legislative agenda on a national level."

In other words, in this scenario, Blagojevich, who has apparently been under financial stress ever since his Lady Macbeth-type wife had to give up her job as a real estate agent / bagwoman because most of her commissions were barely disguised bribes for her husband, would promise to resign as governor. Obama would lean on his friends in the SEIU to give the disgraced governor a job paying $250-300,000 pushing SEIU’s agenda (which includes amnesty). Before moving on, Blago would appoint to the U.S. Senate Valerie Jarrett, Michelle Obama’s old boss when she worked for the Daley Machine.

Tom Balanoff, head of the janitors’ local in Chicago and a close ally of Obama, evidently conveyed Blagojevich’s brainstorm to the Obama camp.

President Andy Stern’s corrupt SEIU is less a union that battles for higher wages for its members than a front for the Open Borders lobby pushing for higher immigration. Wages are ultimately determined by supply and demand, which is why Cesar Chavez, during his prime, ruthlessly fought against illegal immigration in order to keep the supply of labor down and the price of labor for his members up. But, in contrast, Stern’s strategy is to maximize the number of unskilled service workers paying dues into his union at the expense of his members’ wages. Much of his energies go toward promoting leftist political victories rather than getting higher pay for his workers....

Obama and Blagojevich have long been allies, but never have been particularly friendly, coming as they do from very different ethnic bases. They do have a close friend in common: Tony Rezko, the Syrian immigrant operator whom Patrick Fitzgerald sent to jail earlier this year....

Its long history as a major immigrant gateway means that the population is greatly divided by ethnicity. As Singapore’s Lee Kuan Yew, perhaps the most astute statesman of the 20th Century, noted: "In multiracial societies, you don't vote in accordance with your economic interests and social interests, you vote in accordance with race and religion."

The voters who comprise Chicago’s various ethnic blocs know their representatives are sonsabitches. But at least they are their sonsabitches.

You let your group’s veteran politicians pocket some bribes because if you got all high and mighty and threw the bums out and replaced them with some public-spirited novices, your ethnic group would find itself despoiled by all the other ethnic groups’ wily old politicians.

In summary: clearly, the Main Stream Media failed to tell us much about the real Obama.

The fact is that he’s much more interesting than his canned image as the post-racial reconciler.

Not as edifying, perhaps—but interesting.

And the Obama Presidency is just going to get more and more interesting.

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